China’s largest property developer Country Garden Holdings posted another year of profit decline as cracks widened in the country’s US$1.7 trillion housing market. The Shenzhen-based company, ranked at the top of its industry by sales in China, reported on Wednesday a core net profit of 26.93 billion yuan (US$4.2 billion) in the 12 months ended December 31, down nearly 17 per cent from a year earlier, when the Covid-19 pandemic broke out. The firm sold 558 billion yuan worth of homes last year, compared to 570.66 billion yuan in 2020. Country Garden Services distances itself from ex-parent’s liquidity woes In the developer’s filing to the Hong Kong stock exchange, president Mo Bin cited “turbulence and upheavals” in the real estate sector. “The sector is still at its bottom and we foresee that home sales in 2022 across the country will drop,” said Cheng Guangyu, vice-president of Country Garden, at the developer’s results briefing on Wednesday. The company did not set a sales target for this year. China’s housing market has been dampened by the central government’s heightened scrutiny on the elevated debt levels of real estate developers, as well as tighter government control on property purchases and home resales. Several major developers in the country, led by China Evergrande Group, have joined a list of defaulters since the second half of last year, the latest being Logan Group and Sunac China Group Holdings. “What we are focusing on now is to increase gains while cutting costs, including to meet the three red lines,” Mo said at the briefing, referring to Beijing’s loan limit for real estate companies . “We will only do the right thing, which is to keep a good cash flow and maintain good profits.” China eases ‘three red lines’ loan rules for struggling property sector Country Garden carried a total debt of 317.92 billion yuan as of the end of last year, a decrease from 326.5 billion yuan a year earlier. It is currently tagged yellow under the central government’s three red line leveraging metrics, making it the second-most constrained type of borrowers. The company currently has 181.3 billion yuan in cash. The three red lines, outlined by Beijing in August 2020, are a liability-to-asset ratio excluding advance receipts of less than 70 per cent, a net debt-to-equity ratio of less than 100 per cent and a cash to short-term debt ratio of one. Country Garden’s liability-to-asset ratio excluding advance receipts stood at 70 per cent by the end of last year, according to company filings. Mo said that the company aims to achieve the green level and comply with all three red line thresholds by 2024. “Last year, we overcame turbulence in the property sector that had not been seen in the past decade,” he said. “Looking forward, we believe real estate is still a major pillar of China’s economy, and we are confident that it will have a stable and healthy future.” In 2021, Country Garden recorded a 13 per cent annual gain in revenue to 523.06 billion. It declared a final dividend of 0.1012 yuan per share, about half of the 2020 amount.